“Agency Mortgage REITS basically borrow money at 1%, buy government guaranteed (Agency) mortgages paying 4%, and then leverage this carry trade up 6-8 times. As US REITs these companies have to pay out 90% of income, so their pay-out ratios are very high. The pay-outs are not tax advantaged to US taxpayers but, depending on your country of residence and its tax treaties with the US, there may be a withholding tax of 15%. (As a Canadian resident I do not suffer the withholding tax in registered retirement account, but I do in regular trading accounts.)
“The inner workings of AMREITs are quite opaque, but if you want to know what makes them tick there is no better way than to listen to a presentation by the CEO of arguably the best AMREIT, AGNC .
“One source of information on AMREITs (or other companies, for that matter) is the invaluable Finviz site:
“For instance, you can find analysts' ratings, financial information, charts, news reports, and such for AGNC at Finviz
“In reading the charts of these companies please be aware that on ex-dividend days shares prices may drop 2-4%, but this is not unusual. The Google Finance site specifies the percentage of institutional ownership, and often also the volatility through beta.
“Disclosure: the main portion of my portfolio is currently invested in AMREITs. I currently hold AGNC, ANH, AMTG, CYS, HTS, IVR, MTGE, NYM, PMT, with AGNC and MTGE as my top holdings. There are two ETFs specializing in AMREITs, the morbidly named MORT, and REM.
Eoin Treacy's view Thank you for sharing your expertise with the Collective. I'm sure this additional explanation will be of interest to subscribers.Back to top